Running a small business is no easy feat to say the least. It takes a special level of savviness and boldness to successfully navigate the realm of entrepreneurship. One of the most important things a business owner can do is stay on top of new IRS tax rules and regulations that affect small businesses.
In order to help you be most successful, we’re giving you the rundown on the new IRS Guidance on Tax Cuts and Jobs Act (TCJA), which was first announced in October 2018. This guidance affects business meals and what is considered tax deductible.
What the Old TCJA Said
The TCJA that was unrolled in 2017 eliminated any deduction for businesses that were considered “entertainment, amusement or recreation.” Essentially, business meetings over a casual lunch – or anything in the same vein – were not eligible for a tax deduction.
What the New TCJA Says
The new guidance to this act is good news for business professionals who make their connections over lunch outings. Under the amendment for the TCJA, taxpayers can go back to deducting 50 percent of business meal costs.
The Exceptions to the TCJA
Of course, with every piece of good news on a tax deduction, there comes some exceptions. Under the new law, you can deduct 50 percent of the cost of business meals only if:
- The taxpayer – aka business owner – or employee of the taxpayer is present at the meal
- The meal is not lavish or extravagant (sorry, no filet mignon or lobster!)
Along with the two initial stipulations listed above, the guideline mentions the following:
- The meal can be bought for a current client or potential business customer (or similar business contact)
- Food and beverages bought during entertainment will not be considered entertainment, so long as they are purchased separately from the entertainment and is stated separately on invoices and receipts.
If you still have questions about the next TCJA guideline, that’s completely understandable. Give our Greeley accounting experts a call at 970-378-4830 to get help for your business today.